Apple Stockpiles Inventory as It Braces for Significant Supply Constraints

Apple is building up inventory as it prepares for worsening supply shortages driven by the booming demand for AI hardware, with outgoing CEO Tim Cook warning that the industry is facing what he described as a “hundred-year flood” in memory pricing.

The surge in demand for advanced memory components has increased production costs for products including iPhones, Macs and other Apple devices.

Despite those challenges, Apple reported what it called its “strongest June quarter ever,” with iPhone revenue climbing 22% year over year and Mac revenue rising 29%, both exceeding expectations.

Still, the company expects supply pressures to intensify in the coming months.

Apple warns shortages will worsen

Speaking during the company’s quarterly earnings call, Cook said Apple continues to see strong customer demand but faces growing supply chain limitations.

“We continue to expect high levels of demand. However, with less flexibility in the supply chain, we expect the impact from the supply constraints to increase significantly sequentially,” Cook said.

He added that Apple is already experiencing severe shortages with limited ability to offset those constraints through its supply chain.

The biggest challenge involves securing advanced memory used alongside Apple’s custom A-series and M-series chips that power iPhones, Macs and other products.

Inventory reaches highest level in months

Apple appears to be responding by significantly increasing its inventory.

The company reported holding $11.1 billion worth of inventory, nearly double the $5.7 billion it reported last September.

The move marks a notable shift from Cook’s long-standing supply chain strategy, which has traditionally focused on keeping inventory levels as low as possible.

Cook also acknowledged that the supply constraints contributed toApple’ss decision to raise prices for Macs and iPads last month.

Several other technology companies, including Meta, Samsung, Microsoft and Sony, have also increased hardware prices as component costs continue to rise.

“We’re going to be scrambling on the supply side, essentially,” Cook said.

Growth outlook slows

Looking ahead, Apple expects revenue growth of between 9% and 11% year over year during the upcoming quarter.

That forecast is lower than the roughly 16% annual growth the company has delivered in several recent quarters.

The softer outlook unsettled investors, sending Apple shares down about 6% in after-hours trading.

When Senior Vice President of Hardware Engineering John Ternus succeeds Cook as CEO in September, he will inherit a company navigating persistent supply shortages and rising component costs.

Apple, however, is far from alone, as hardware manufacturers across the technology industry continue to face mounting pressure from surging AI-related demand for advanced memory and other critical components.